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What next for ethical trade?

An experienced social auditor in many countries and former social compliance manager for Marks and Spencer, Muriel Johnson now leads regular training workshops run by ETI. I talked to her about current ethical trade trends.

What has been the dominant trend in ethical trade over the last few years?

Increasingly companies are integrating ethical trade into their buying functions - they recognise that there's commercial benefit from trading ethically and are starting to unlock the potential of their buying teams to be a force for good.

Fairtrade can take a lot of the credit for this sea-change. In the past, companies were more likely to deny there were any problems in their supply chains, and often refused to have a dialogue about the issues. The public's greater awareness of Fairtrade has helped companies to have a much more public debate about the challenges they face, and as a result companies are able to take a much more holistic approach in supporting their suppliers to raise standards.

So where do buyers fit in?

You can't raise wages by simply paying suppliers more - the money can be skimmed off without reaching workers and the audit is likely to be fudged to hide it. Likewise, imposing restrictions on overtime won't fix excessive working hours - suppliers may just sub-contract the work.

The best way to unlock these perennial issues is by helping suppliers to run their businesses more efficiently, so their factory generates a profit without people having to work excessive hours on sub-legal wages. That means retailers examining their own critical paths and giving suppliers more reasonable lead times as a result, and also, where they can, helping them to smooth out the spikes in their order books. Buying teams have a crucial role to play here.

Buyers can't take this on single-handedly though, can they?

Enabling buyers to play this role requires enormous support within the business on several fronts. Increasingly we see companies engaging the hearts and minds of their buyers, who are increasingly aware that their decisions have an enormous impact on the lives of workers.

But the efforts of ethical trade teams to raise their awareness have to be backed up through the core of the business - otherwise ethical trade teams risk being seen as ‘sales prevention teams' - you can't appeal to the conscience of a buyer on the one hand and then penalise them for making responsible decisions on the other.

Who's getting it right?

I see it working in companies that have adopted balanced scorecards for their buying teams. As well as the usual measures for design, quality, price, delivery time etc, over the past 2-3 years we've seen measures for ethical performance creep in whereby buyers are rewarded for placing more orders with the better ethical performers.

A challenge for companies is then to decide how best to encourage the reward of suppliers - do you encourage more orders solely for the best performers, or can you also reward the suppliers who've made the biggest incremental improvement - without penalising your consistently high-performing suppliers?

Is the job of a company's ethical trade specialist a lonely one?

One of the participants on the workshop I led today commented that the course had been ‘A great place to talk'. If you're the lone ethical trade figure in your company, it can be a struggle to get heard. But this is changing. It's easier to get senior managers on board than it used to be, and there's an emerging trend for ethical trade and HR teams to work closer together - after all, labour standards and conditions are all about people.

Often it is brands' and retailers' HR departments that can lend support to suppliers in developing countries and help them develop robust HR systems of their own. So in fact if you're an ethical trade manager in a retailer or brand, your HR manager is likely to be one of your biggest allies.

Is this the beginning of the end for the ‘comply-or-die' model?

Well, the 'gotcha!' mentality is losing face because suppliers are often one step ahead of auditors. In fact I rarely hear people talking about 'compliance' anymore. Instead it's much more about whether companies are making improvements against the ETI Base Code.

Traditional audit won't take a back seat, but it will be increasingly supplemented with efforts such as participatory appraisal, which help a supplier to build its capacity to perform better. I believe that audit companies which are not yet developing a participatory approach are missing a trick.

My advice to companies is if you really want to make progress, spend less time trying to catch suppliers out and more time working alongside them to support the growth of their management systems - and let them borrow expertise from your own HR function if they need it.

And will suppliers come along for the journey?

A lot of brands and retailers who only preach the ETI Base Code meet strong resistance from suppliers in developing countries. It can feel too much like just another company code that needs to be upheld for the duration of an audit.

In my experience, it's vital to spend time looking at what the law for that country says first. Often it will be every bit as strong as the ETI Base Code, as national laws, like the ETI Base Code, tend to be based on ILO conventions. So they are often strong on paper, just not upheld in practice. It's much easier to get buy-in from suppliers to a code whose standards are seen as already being part of their national legal framework.

How has the debate around the business case for ethical trade moved on?

Regardless of positive or negative impact on the bottom line, trading ethically has become a business imperative - many brands feel they have no choice but to up their game - the market expects it. It's not necessarily that consumers are voting with the pound in their pocket, but retailers are acutely aware that their customers have high expectations of their favourite brands and expect companies to take responsibility for conditions in supply chains.

Five years ago, stories of poor conditions were only reported in occasional newspaper exposés. But whether through Fairtrade, or through reality TV series', these ideas have become assimilated into the public consciousness as never before. And, quite rightly, companies don't want to look out of step.

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ETI's blog covers issues at the intersection of business, news and ethical trade. We welcome a range of insights and opinions from our guest bloggers, though don't necessarily agree with everything they say.